LONDON, July 26 (Reuters) - The euro and European sharesturned decisively higher on Thursday and German bond prices fellafter European Central Bank President Mario Draghi said his bankwas ready within its mandate to do whatever it took to preservethe single currency.

U.S. stock index futures moved higher as well pointing to astronger start on Wall Street.

Speculation had been rising that the ECB, which holds apolicy meeting next week, is considering new measures to tacklethe euro zone's debt crisis as countries such as Spain and Italystruggle to fund themselves and evidence grows of a region-wideeconomic slowdown.

"Within our mandate, the ECB is ready to do whatever ittakes to preserve the euro. And believe me, it will be enough,"Draghi told a pre-Olympic games investment conference in London.

In a reference to the high premiums peripheral Europeannations including Spain are forced to pay to raise funds, Draghisaid: "To the extent that the size of the sovereign premiahamper the functioning of the monetary policy transmissionchannels, they come within our mandate."

The euro hit the day's high of $1.2177 after thecomments were made, from around $1.2130 beforehand.

The FTSEurofirst 300 index of top European companyshares was up 0.3 percent at 1,021.14 points and prices for10-year German bonds fell, sending the yield to 1.3 percent fromabout 1.23 percent prior to the statement..

Before the speech the problems of Spain and Greece haddominated market attention.

European Commission President Jose Manuel Barroso is due tohold talks with Greek premier Antonis Samaras in Athens later,as a group of international lenders try to decide whether tokeep releasing funds from a 130 billion euro bailout package orlet the country go bust.

Barroso's visit comes after Citi economists raised thelikelihood of Greece leaving the euro zone in the next 12-18months to 90 percent from a 50-75 percent chance previously.

Investors are also worried about Madrid's ability to keepfunding itself from the capital markets in the face a sharpslowdown in its economy and growing calls for help fromstruggling regional governments.

Spain's 10-year government bond yields edged down to around7.2 percent, but still remain close to their euroera highs of 7.75 percent and at levels deemed unaffordable inthe long term.

EARNINGS DOWNBEAT

Before Draghi's comments equity markets had been feeling theeffects of downbeat corporate earnings, with many largecompanies pointing to Europe's crisis as the source of weakeningorders and consumer demand.

German engineering conglomerate Siemens said theeuro zone problems were largely responsible for a 23 percentdrop in quarterly new orders.

The world's second largest western oil firm Royal DutchShell also missed forecasts, reporting second-quarterearnings of around $6 billion, down from $8 billion a year ago.

Oil prices had dropped below $104 a barrel on thedisappointing company earnings and as the dollar gainedslightly, but Draghi's comment started a broad rally.

Brent crude was up 40 cents to $104.78 per barrelwhile U.S. crude was up 43 cents at $89.40.

Oil prices were also being supported by expectations thatweak economic data in the U.S. will prompt the Federal Reserveto introduce a third round of quantitative easing (QE).

These hopes were raised after data on Wednesday showed thebiggest drop in single-family home sales in a year in June.

"Despite increasing speculation that the Fed will announce arange of measures including further QE, possibly as early asAugust, the underlying confidence remains fragile and volatilitylooks set to continue," Mike McCudden, head of derivatives atInteractive Investor, said.